Prevailing sentiment with MoM Re EPs

[Goldy740]

Just wondering what's the prevailing wind in terms of EPs being accepted at the moment?

I set up my own company last year, complete startup (no revenue or clients) and $70,000K capital, paid myself $7k and got rejected (reasons where not enough capital to the salary and no client sales invoices)

I am working through my wifes EP on a DP/LOC and have no built the business, i have a list of clients who are paying and more like $150,000 in capital. I would like to reapply first quarter of next year.

Wondering where the MoM has become less or ore stringent since 2015.

Many thanks

[sundaymorningstaple]

More. With 150K I wouldn't pay yourself any more than $5K initially. You have to get your foot in the door first.

[Strong Eagle]

I second SMS'es comments. Pay yourself the minimum salary to be granted the EP. Several local "advisors" have completely screwed their clients with the false belief that a big salary means that MoM somehow will look more favorably upon your application.

Wrong. What matters is the balance of revenues and expenses, and that is what MoM looks for. Essentially, you've got to have enough cash to run your business and pay yourself to the point that you achieve break even. You think it will take you 18 months to reach profitability, then you need cash to cover 18 months of expenses, less whatever revenues you actually earn over the period.

If you've got live clients, or strong potential for same, build them into your pro forma financials. Demonstrable revenues will make the pro forma's more believable. I think MoM still sends these kinds of EP applications over to SPRING, so it is essential that business plan assumptions are realistic and that pro forma's are consistent and inline with what real functioning small businesses actually produce.

Edited to add: My partner and I put up $200K and had a client that was paying about 80 percent of our costs already. It was a shoe in. Beware the business plan wherein you are down to your last $1.98 in the bank and you magically roll into the green. Better that your plan reflect a reserve in the event that your projections don't actually meet reality.